We use cookies to customise content for your subscription and for analytics.If you continue to browse Lexology, we will assume that you are happy to receive all our cookies. For further information please read our Cookie Policy.

International tribunal confirms that Article 22 of the Venezuelan investment law does not constitute consent to ICSID arbitration

At the end of December 2010, in a decision that will be of interest to international companies doing business in Venezuela, an ICSID tribunal in the case of Cemex v. Venezuela (ICSID Case No. ARB/08/15) concluded that it did not have jurisdiction over claims brought pursuant to Venezuela's Investment Law. The tribunal concluded however that it did have jurisdiction over claims brought by the claimant companies pursuant to the Netherlands / Venezuela bilateral investment treaty.

In relation to the issue of jurisdiction pursuant to Venezuela's Investment Law, the tribunal had to consider whether Article 22 of the Investment Law provided the requisite consent to arbitration as required by Article 25 of the ICSID Convention. In doing so, it addressed three questions:

What is the standard of interpretation for the Investment Law?

Venezuela had argued that, as part of its domestic law, the Investment Law should be interpreted according to Venezuelan legal principles. The claimants, in contrast, argued that the appropriate standard of interpretation was international law. The tribunal concluded that the Investment Law, as a possible unilateral declaration of consent to ICSID jurisdiction, represented an instrument of international law, and should therefore be interpreted by reference to international law.

What is the content of the international law standard of interpretation?

In considering this question, the tribunal concluded that an analogy could be drawn with International Court of Justice (ICJ) case law on the interpretation of unilateral declarations of compulsory jurisdiction made under the framework of Article 36(2) of the ICJ's Statute. Relying on such cases, the tribunal concluded that the content of the interpretative standard under international law comprised the following:

First, the Investment Law, as a unilateral declaration, "must be interpreted as it stands, having regard to the words actually used", in a "natural and reasonable way".

Second, due regard must be had to the intention of the state concerned. If the text is not clear, the court will look at the relevant context and evidence regarding the preparation and purpose of the declaration. The intention of the state should prevail and can only be defeated by a fundamental defect which vitiates the instrument by failing to conform to a mandatory legal requirement.

Third, the tribunal qualified the content of the standard by noting that both domestic law and the international law of treaties should not be completely ignored. The domestic law, for example, might inform the intention of the State that made the declaration.

Pursuant to this standard, how should Article 22 of Venezuela's Investment Law be interpreted?

Applying this standard to the Venezuela Investment Law, the tribunal was unable to conclude from what it felt was the "obscure and ambiguous" text of Article 22 that Venezuela consented unilaterally to ICSID arbitration for all disputes potentially covered by the ICSID Convention. The tribunal therefore concluded that Article 22 did not provide a basis for its jurisdiction. Perhaps unsurprisingly, given that they were both presided over by former ICJ Judge, Judge Gilbert Guillaume, the tribunal's reasoning and conclusion in Cemex was similar to that of another tribunal earlier in 2010 in Mobil v. Venezuela (ICSID Case No. ARB/07/27)

Conclusion

Although a number of States have national investment laws in place referring to international arbitration amongst the dispute resolution options, there are relatively few cases where tribunals have interpreted those laws. The Mobil and Cemex decisions therefore not only provide useful guidance to investors in Venezuela, but to those seeking to interpret or rely on similar laws in other jurisdictions.